Finance / Greece
Banks: Gradually returning to normal
After the hard years of the crisis, it appears that 2018 will see banks get back on track.
View of the main facade of the Central Bank of Greece.
After Greece’s comeback in the sovereign debt markets in July 2017, the National Bank of Greece (NBG) followed suit with a first three-year bond issue in October at a value of 750 million euros. This is a positive sign for the sector, as it is the first time since 2014 that a Greek bank has returned to the markets. Between May and July 2018, “stress tests” will determine whether other institutions will need to be recapitalized before the official release of the aid program in August.
Since 2012, the banking system has already been recapitalized three times, which is globally unprecedented. The last recapitalization of banks in November and December 2015 gave a sense that the situation was returning to normal. “Banks now operate with a capital ratio that is well above the European average. The banks’ credit is positive again after several years when it was negative,” says Nikos Karamouzis, Chairman of the boards of the Hellenic Bank Association (HBA) and Eurobank.
Nevertheless, he underlines that Greek banks have “accumulated hundreds of billions of euros of non-performing loans, they still depend on the European funding program of about 40 billion euros and they lost nearly half of their deposits.” The president of the HBA believes that the priority is now to restore the credibility and confidence of the markets. “We are at the early stages of the process to restore our relationship with the markets that was destroyed in 2012 and 2015,” he said.
For the first time in years, Greek banks are making profit again. The government aims to further ease capital controls and the conditions for access to liquidity are improving. The dependence on the ELA (Emergency Liquidity Assistance) mechanism allocated by the ECB in 2015 is also decreasing. “Creditors must realize there is no more Grexit on the table,” says Nikos Karamouzis. Greek banks seem ready to accompany the rebooting of the nation’s economy.